Estate agents in the UK deal leasehold land and freehold land. Do you know what the distinction is? If you're seeking to purchase a piece of land it's essential you comprehend on what basis you're purchasing, as it can impact your rights in all sorts of ways.

In this guide, we'll be focussing on leasehold land. We'll explore what it is and whether it might be the right choice for you.

What do we suggest by the term leasehold land?

In the case of leasehold land just like property leases, the buyer does not become the straight-out owner. Instead, the purchaser purchases special permission to use the land for an amount of time. A piece of land's ownership history, as well as its existing tenure (i.e. freehold ownership vs leasehold ownership), are all included in its title deeds, a copy of which is normally held by HM Land Registry.

Leasehold ownership lengths can vary hugely. Some lease lengths may be for a 50-year duration, a 90-year duration and even a 999-year period, depending upon the initial lease and when it was prepared. When the time limit on the lease pertains to an end, it can typically be extended, however this may sustain legal costs.

There are advantages and disadvantages to the purchase of leasehold land. In particular scenarios, such as the production of cost effective housing in inner cities with high residential or commercial property prices, it can be of excellent benefit.

Where did the idea of leasehold land originated from?

The concept of owning land and renting it to others is not a new one. It can be seen in the history books as far back as the Norman conquest, although it would have looked really different to how it does today.

The leasehold land model as we understand it dates back to when the 'landed gentry' owned big swathes of land or large country estates, using long-lasting lease contracts to those wanting to farm or live on the land. In the UK a few of the greatest landowners were (and still are) The Crown and the Church, with many long leases sold to permit the structure of both industrial residential or commercial properties and houses.

Large landowners would approve long leases to designers enabling them to develop and either offer or earn rental income from the land. Those landowners would then share in the income source that was eventually received from any structures erected. Still to this day, areas of London, consisting of Regent Street and the areas around much of the royal parks, are constructed on leasehold land owned by The Crown.

It's only been because the Second World War, when local authorities were aiming to help reconstruct their cities and communities and produce inexpensive housing in a hard financial period, that this leasehold land design started to make sense.

It allows much-needed cost effective housing advancements to be funded and constructed without the debilitating up-front costs associated with land purchase. And what's more, it sees a stable stream of income returning into the public coffers over the longer term.

Is leasing land an excellent idea?

As the freeholder, the owner of the land will require to pay the costs of buying the land. This could be a large sum. If you don't have available capital to invest, renting can be a good route to getting the right to use the land for whatever you want at a fraction of the initial cost.

Leasehold land offers more security than you might believe. In many cases, a leasehold agreement uses the same level of security as a freehold. The contract you sign to acquire the lease will mention the specific time period for which the land is rented to you. During this duration, no one can take away the land from you for any reason.

If you build a home on the land you will have the same rights over it as you would were the land freehold. You will have the ability to remodel, extend or alter it, offer it or rent it out without first seeking approval from the landowner. What's more, if you pass away, the ground lease can be passed on through your will.

You will have the ability to utilize your parcel of land nevertheless you want, depending on the regards to the lease and subject to permission. Most arrangements will permit you to put up a residence, industrial residential or commercial properties, construct something for the good of the neighborhood, or work from the land as you need to.

Once the lease period is over, you should deserve to restore your arrangement, via a lease extension, and continue with the plan you had. And it will continue to be the responsibility of the owner to preserve the land that he has actually rented, covering upkeep costs, service fee, administration charges etc.

And meeting the purchase cost ought to not be an issue, there are lots of mortgage lending institutions that will more than happy to help you fund the purchase as long as the lease term staying is appropriate.

Who does leasehold match?

Leasing land works specifically well in some scenarios. If, for instance, a landowner wishes to retain ownership of a plan of land but not establish it themselves, they might enter into a land lease contract with a designer. This would put the onus on the designer to build and offer several homes, while the freeholder retains ownership of the land.

In this case, the residential or commercial property owner would delight in a stable income stream from ground lease charges and other upkeep fees.

Due to the cost and length of time it takes before a return on investment is seen, it can be particularly tough for smaller sized personal developers to get great plots of land to build on, specifically in more costly areas such as central cities.

If developers who aren't cash-rich find it hard to protect finance to fund the up-front purchase of a piece of land, the opportunity to rent and pay back across time, lastly passing those ongoing expenses to buyers, is an appealing one.

The leasehold model provides the chance for councils, charities, housing cooperatives and Community Land Trusts (CLTs) - a kind of community ownership - to come together and help people on lower earnings to build their own homes. All by reducing or getting rid of the requirement to find the up-front capital to buy land.

Are there any disadvantages?

While you may find it advantageous to avoid the high expense of purchase initially, paying annual ground rent charges can also hurt in the long run. These charges are responsible to rise in line with the regional market rate for land, and you may have little control over the boost.

When you acquire leasehold land in the very first place it is necessary to check for how long is remaining on the lease. Extensions not only require affordable time and effort, however they are likely to sustain legal charges.

What's more, there is a threat your extension request could be denied. The landowner might not want to extend the lease, maybe choosing to establish the land or utilize it personally in some way. If you've invested cash to make the land fit for purpose this could be difficult.
supermoney.com
As a leaseholder instead of a freeholder you will not have overall control of what you can do with or on the land. Make sure to investigate what you are and aren't enabled to do according to the terms of your lease.

Feel confident, many of these threats can be alleviated by doing your research and seeking professional legal recommendations upfront.

What takes place at the end of a lease?

At the end of a lease, where no extension has been concurred, the landowner will can acquire the land and whatever that has been constructed on it. Ownership is legally moved. Use Addland's guide on how to discover who owns land to find the best way for you to research study land ownership.

Interestingly in lots of locations in Europe - where leasehold is a popular technique for councils to own and lease out land and residential or commercial property - this right of foreclosure doesn't exist in the very same way. If the lease is not to be extended, the council will typically consent to pay the outgoing leaseholder the residential or commercial property appraisal of any building that has actually been constructed on the land.

Is leasehold the right model for you? Addland can assist you discover leasehold land for sale In the UK, conserving you time by offering you all the info you require in one place. And with information from HM Land Registry and Ordnance Survey, covering factors to consider from flood zones to AONBs, we can help you construct a complete photo of the land you're looking to buy.

Addland makes it simple to Find, Research, Buy or Sell land. Start your land journey today.
supermoney.com